Why Selling Mineral Rights may be Wiser

If there is one thing that’s certain about selling mineral rights, it’s the cash that is ready to be placed in your hands – not tomorrow, but today. The oil and gas business is definitely risky and shaky so that an offer amounting to millions of dollars today can suddenly go kaput because of the “hold on and never sell” principle.

Selling mineral rights is still a hot issue among property owners along shale regions – areas where oil and gas exploration activities are most active. These areas include the Marcellus shale, Niobrara shale, Haynesville shale and Eagle Ford shale, among others. Places where exploration for gas and oil is intense means a significant cash bonus for owners, but only if their mineral rights are on lease at the moment or owners would decide to sell mineral rights for a really big lump-sum.

Not long ago, one family was offered $4 million, while another was offered as much as $12 million by a company willing to buy their mineral rights. Both refused to sell, thinking that their properties would produce much and that the amounts were not big enough.

Wells were drilled near their properties, not long after; the natural gas produced from the drilled sites, however, was far below than what the company had hoped for. Good for the company – it did not have to spend millions of dollars for nothing. For the two families, though, it was a very, very big and disappointing loss for what could have given them millions of dollars are now worth nothing at all.

Can holding on to mineral rights prove wiser than selling it? Even big companies with producing leaseholds decide to sell eventually – this is the trend in the oil business. Many owners too, in the past, have stuck to the practice of selling their rights than leasing or holding on to these. The amount you can get from the sale will also definitely be useful for future financial concerns such as retirement funds and the education of your child/children. A part of it may also be used for a relaxing vacation, a holiday escapade which you deserve, or to pay off the balance of your mortgage (if you have mortgaged your property), to save it from being foreclosed or to save you from having to file for bankruptcy.

Thus, choosing not to sell when a company offers to buy can be a decision that you may regret in the future. On the other hand, opting to hold on to your property and leasing it instead may also yield fruit in due time; the only question is, how long will that time be?

Some owners decide on leasing half of their mineral rights and keeping the other half untouched. A wise decision? What if the leased half comes short of the company’s expectations, or worse, produces nothing at all? Your whole property will then be worth nothing.

You can base your decision on these two arguments, then; take the risk of not selling, which can end up with your property being worthless or worth very little, or decide to sell everything, which can save you from the inconvenience of negotiating with the leasing company and which will allow you to immediately put to use and enjoy the big cash that is ready for payment. Which will it be?